A Plan for Fighting the Double Digits

By one measure, at least, double-digit inflation is back. As Jimmy Carter and his economic aides were busily polishing the much trumpeted anti-inflation program he plans to announce this week, the Labor Department reported that the Wholesale Price Index rose 1.1% in March, the biggest jump since the bleak old days of October 1975. That translated into an annual rate of 14%, and was the second straight month of double-digit rise. Just this sort of news, and fear of more, has sent the stock market tumbling 8.5% so far this year. It continued to slide last week, although the other economic indicators have been so favorable that real gross national product may well rise 7.5% or more in the second quarter.

Speaking of wholesale prices, Lyle Gramley, a member of the President's Council of Economic Advisers, said: "We're certainly not happy with the numbers, but we don't think they are cause for alarm. Whatever way you look at it, you don't come up with anything much more than a 6.5% increase in the underlying rate of inflation."

-Of course, inflation is unsafe at any speed above 4% or 5%. The latest rise was mostly due to a weather-induced leap in food prices, and economists in and out of Government tend to concur with Walter Heller, a member of TIME'S Board of Economists, that "in two or three months, the food problem will be completely played out."

Less easy to explain away was a steep rise in industrial commodity prices. Many basic products, including aluminum, rubber and various plastics, are getting more expensive all the time --and manufacturers have been moved, or at least tempted, to reflect the real or anticipated higher cost of supplies in their own prices. Take James Brownell, vice president of Florida-based Weatherking, Inc., maker of air conditioners: "I have seen in the past several months price increases from my vendors slip upward from five to seven percent. It scares the daylights out of me."

No Coercion. Businessmen are afraid of being caught short if Carter moves to controls or guidelines. But the Administration has pledged that its inflation remedy will not be coercive. It will be billed as a voluntary effort by industry and labor to keep prices and wages down. Businesses and unions will be urged--but not formally required--to notify the Administration in advance of price and wage boosts. In a small and select number of cases, the principals will be invited to Washington to hear suggestions that their increases be modified. As Treasury Secretary Michael Blumenthal told the National Association of Manufacturers in March: "Let me assure you, as one trained hi business, that we know the difference between coercion and cooperation."

Still, as Chrysler Corp. Chairman John Riccardo said last week: "Every time he [Carter] starts talking prenotification, we start thinking controls." Businessmen and labor leaders are acutely aware of the President's ability to marshal public opinion and exert psychological pressure. Just after Carter's

Inauguration, Budget Chief Bert Lance suggested to U.S. Steel Chairman Edgar Speer that the company's proposed price increase for tin-mill products was too high; Speer trimmed it to 4.8%. At week's end, officials of the United Steelworkers Union approved a new three-year contract that provides for an 800-an-hour increase over the life of the agreement. It also makes a modest start toward guaranteeing steelworkers lifetime job security. Union and company spokesmen disagreed on whether the contract, which needs rank-and-file approval, was inflationary.

The Administration's standard for judging a price rise will be the adequacy of a company's profit margins. Major aluminum manufacturers recently raised prices with the Administration's tacit consent after demonstrating that their long-term costs were rising.

The rest of Carter's anti-inflation plan shows he is a moderate, and it should not scare the pinstripes off the business community. Major elements:

> Formal review by the Economic Policy Group--a Cabinet-level panel analogous to the National Security Council--of the economic impact of virtually all proposed Government actions. Carter has already tried to pull the plug on as many as 30 regional water projects; he came out for a modest 20-c- boost in the minimum wage, to $2.50; he rejected the request of the International Trade Commission for higher duties on imported shoes (see ESSAY).

> Review by the White House of all existing regulations--job safety, transportation, pollution control and the like --to try to reduce the cost of compliance by business while still meeting regulatory goals. The Occupational Safety and Health Administration, for example, is on the verge of requiring many manufacturers to further reduce noise in their plants, but the Council on Wage and Price Stability has reckoned that the price for business could run up to $32 billion a year, and OSHA may be obliged to retreat.

> Creation of an "early-warning system" to spot potential inflationary supply and capacity bottlenecks. The Council on Wage and Price Stability will be enlarged to handle this system.

> Commitment to a program to spur business investment. It would include an attempt to reduce uncertainties about future Government regulations--for instance, pollution-control standards --that are delaying capital projects, as well as renewed pledges that the Administration's tax reform proposals next fall will contain investment incentives.

The objective, as Charles Schultze, chairman of the Council of Economic Advisers, sums up, "is to do as much as possible to make sure you don't reaccelerate inflation, and do as much as you can to slow it down." The program will not be quite as voluntary as the Administration would have businessmen believe, and may not be as effective as Carter hopes. But it does have the virtue of avoiding formal controls, and the new attempt to see that the Government does not add unnecessarily to business's cost is a sign of progress.

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